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Ripple is based around a shared ledger, the XRP Ledger, which uses a consensus process that facilitates for payments, exchanges and remittance in a distributed process. The native token of the ledger is known as XRP, which as of November 2018 was the third largest cryptocurrency by market capitalization.

In Ripple, users make payments between each other by using cryptographically signed transactions denominated in either fiat currencies or Ripple's internal tokens (XRP). For XRP-denominated transactions, Ripple can make use of its internal ledger, while for payments denominated in other assets, the Ripple ledger only records the amounts owed, with assets represented as debt obligations. The mechanism of making payments by means a network of trusted associates is referred to as 'rippling.'

Destination tag is a unique identifier intended for the recipient of the transaction. Similar to the "Payment ID" used by Monero or regular "payment reference numbers" one would use in their bank transfers, this number is essential for identifying the origin of the transaction.

You have to use the destination tag when sending XRP to exchanges or vendors which need to identify and pair your payment. In these cases, destination tag is provided by the receiving party.